Terminal Value

Outcome Based Strategy with Jonathon Hensley

Janine Bacani

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We have Jonathan Hensley with us today, the CEO of Emerge Interactive. That’s emergeinteractive.com. And what we’re going to be talking about today is outcome based strategy. We spoke about a little bit in the pre show, so I’ll just start unpacking a little bit. But the thing that we were talking about was actually how a lot of strategies end up being aspirational, which means they’ll end up being vague, which means they’ll be almost impossible to measure. So, for example, if you have a strategy that says something like, okay, we want to delight customers and change the digital world, okay, that’s great. How do you measure that? How do you know if you’re getting closer or further away? Because if you don’t have that outcome based measurement, you really don’t know whether you’re doubling down on the wrong strategy. But anyway, I don’t want to spend the whole time monologuing. Jonathan, please introduce yourself. 

Thank you so much for having me on the show, Doug. Again, my name is Jonathan Hensley, CEO of Emerge, and I’m thrilled to be here to dive into the conversation today. 

Outstanding. Well, okay, so let’s just keep unpacking this idea a little bit, because I know during my corporate career that was one of the things that I saw a lot of times, is that in a lot of cases, there were strategies that were pretty high level, that were I think visionary was the word. But it’s getting that down to a metric. You can measure and tell whether it’s going up or down and whether it’s meeting a performance benchmark. That always seemed to be the hard part. 

Yeah, it’s a really significant challenge, whether it’s the business strategy or you’re creating a strategy for a product or service, in service of the mission or the purpose of the company. But I think it’s really key to understand that, as you said, strategy is not this inspirational or just aspirational aspect. I mean, it is essential that you have a clear, long term objective that you’re defining and moving towards with strategy. But we have to understand that that objective needs to not just be inspirational to the team that’s being charged to achieve this larger goal, but it really has to be measurable, and it has to be something that can be quantifiable or tangible for those so they can self identify with it and within a strategy. That alone does not make a strategy. A strategy really requires to have foundational components and beyond the vision itself, which is often where things can unfortunately be left to live and doesn’t go any further, is you need to then really start to unpack what what are the challenges that we have to solve as a team or an organization and in what order? And why are we going to focus on those challenges that differentiate us, that help us build a better connection with our customers that will help us really drive the momentum that we’re looking for in the organization. And then once you understand that, you can start to really fine tune the details that support that of what are the critical business outcome that we need to achieve in the near term to move towards that vision. And then secondarily, and often these two things are missing. It’s one or the other. You need to understand what is the outcome for the customer, what does success look like to them? And those things are usually decoupled and they really need to be looked at together because one drives the other. There’s an intimate relationship between the customers experience and their outcome and the business’s outcome in the near term as it feeds and fuels that long term objective. And then what we can do is we can decide on the approach to best get there based on the resources and the constraints we have as an organization, our skills and our capabilities and the depth of experience of the team. And we can then start to measure incrementally, forward progress and not focus on the lagging indicators, but really focus on the precursors that help us understand are we moving towards those outcomes as an organization and as a team.

Got it. Unpacking the unraveling of the box a little further. How do we go about kind of creating those? Because I think conceptually, I can’t think of a single manager, director, VP, CXO, whatever, who would disagree with what you’re saying. It very rarely happens. So that means that the ball of yarn comes unwound at some point. When does that happen and how do we fix it? 

So a lot of times and you point out a great thing like no one really argues with it, the premise, but I think the actual effort that goes behind being able to deliver a great strategy, one that will be effective, is extremely difficult and I think that that is not as well understood. There’s a lot of challenges and this has been going on since the mid to late 80s, where strategy started to get very nebulous and confusing. The idea of follow this framework, fill out this method, do these things and that will result in a strategy. And those frameworks are meant to be tools to help us facilitate critical thinking and yet they’ve been turned into kind of these package deals, this will get you the result and unfortunately it just doesn’t work that way. There is still the hard work that has to be done at every level and foundationally for that. It’s really you have to make sure that to drive you need to start with understanding the problem that you’re solving. And that means understanding not just the scope of the problem and the environment and the stakeholders in the marketplace that are impacted by that problem. But it means also really understanding the audience that you’re trying to engage with from that, how it impacts them, how they measure value. And it also helps you understand the lens of what you’re really competing against. And I think that’s also typically not as well unpacked as it can be really helped drive impact. And so an example of that would be as many times we look at our peer organizations as direct competitors and really that’s what we’re competing against. But we’re competing with far more than our direct competitors. We’re competing with potentially internal resources, homegrown solutions, resource constraints, prioritization that the organization is going through with multiple initiatives, maybe similar solutions that aren’t as good or maybe the solution you’re offering is just too much of a lift to adopt and transition on. And so we really need to understand that from each angle to understand what is our area of opportunity, what attributes can we bring in solving this problem in a unique or different way that will actually help us gain traction, whether that be externally connecting with the market or internally driving engagement and team performance where we’re building tools and strategies that support our employees. 

Wow there’s a lot to try to unpack there so I’m going to try to take it in a few different chunks. There was one of the things you were saying kind of reminded me of this is a while back in my career now, but I remember back when I was at intel and at the time I was in the group that was doing special processing unit pricing. This is kind of where this is the golden goose of Intel’s profit margins. But anyway, at that time, it was around 2010, 2011 time frame, the focus was exclusively looking at, okay, what is Intel’s Head to head performance with AMD? And so what we do is we’d have the benchmark data say, okay, well this price point, this product performs like this and so we’re going to be most competitive here. We have a little bit of a weakness there. Here’s our backup plan. We had this elaborate playbooks put together. I did all the sensitivity analysis on what we do, how we’d adjust price, how we adjust features, et cetera, et cetera, et cetera. Then tablets and mobile phones came in and they just sheared the top off of the PC market. Something that we completely didn’t see coming and had absolutely no strategy for. And so to me that’s kind of one of those things which is where, you know, you can get so focused on say, a market segment or a head to head competitor that if you’re not really astute, you can miss a new entrance coming in or you can miss a change in market dynamics that will adjust what your market actually means. And so I think one of the things that I think I heard tell me if I’m telling if I’m projecting here, one of the things I think I heard is incorporating that into your analysis so that you understand where are those risks of new entrance so you don’t get blindsided by somebody coming in and drinking a milkshake?

No, I think that is spot on, Doug. I mean, I think

when you look at strategy, I think it’s important be clear, be stubborn about your vision, but understand that the rest of it needs to be adaptable. It needs to be able to be nimble, to adjust with shifts in the market, new innovations.

 There’s so many unexpected things that happened in the world over the last several years. No one could have forecasted or planned against many of those things. It would just be almost impossible. So you have to have the ability to adapt. And I think a lot of times what can happen is we get so fixated on the how and the what and we lose track of the why. We do that in the beginning and then we move on. And that how that plan gives us a sense of security. It gives us a sense of control and absolute. And you have to recognize and strategy that it’s not about control and it’s not about absolutes. It’s about understanding and identifying the best approach to address the problem that creates that value. And that value creation is the most important thing that we’re looking for to drive the achievement of that long term objective. And so the way that we create that value needs to be flexible and needs to be able to adapt. If you have to pivot using the intel example, because the mobile and tablet market all of a sudden starts surging and it’s hit a tipping point in adoption and device adoption in demand, then that changes the plan. But it’s a huge opportunity, right? It starts to change the approach and the relationship to everything that’s been done, but that should be expected. And so I think that strategy is one of those things that often can be kind of considered. As I do it, once I move on, I go work on it for a while and maybe we bring it back or in team meetings, we talk about the vision and we build momentum around that. Strategy has to be more than that. It has to be episodic. It needs to be revisited and evaluated and become part of the dialogue in an organization to drive maximum velocity and impact on a regular basis. And that cadence is specific to the nature of the business. How fast does that business need to be innovating and changing and how adaptive is the market? So if you’re in a retail side where trends and preferences are changing rapidly, you might be doing it once a month. I know tech companies that are doing it every week. So it’s relative to where you sit. If you’re in the financial industry maybe once a quarter, it’s important to recognize that there isn’t a one size fit all. But there are best practices and patterns that enable any organization at any scale to be effective with their strategy.

Well and I think there’s actually one thing we talked about in the pre show that I’d kind of like to bring in to augment what we’re talking about here is that first of all, there’s absolutely nothing you said that I can disagree with. But I would like to augment it with one thing which is that at least in my observation, there are many strategies that are created where there is no link between the strategy and how this is going to be internally resourced, funded and executed. We used to call that the unexplainable strategy. And so it’s a strategy, a strategy that you can’t execute or don’t have funded. To execute isn’t a strategy, it’s a pretty looking slide deck. And so I think one of the jokes we were making at the end was you were talking about all the different stages in the emerge value chain and that last stage was operationalizing and you like yeah that’s the least sexy want to go? Yes. But it’s probably the most important because until you get that strategy executable it’s just pretty slides. Somebody has to actually do all this stuff and I think that’s a place where that’s where I’ve seen the ball gets dropped probably more frequently than anywhere else. 

Well, I mean it is the area that is probably the most difficult and it’s an issue of culture candidly. There’s a challenge of where does responsibility for strategy and then the bridge that has to be taken between making that strategy and identifying is it viable and feasible for the organization and then moving that into execution. And there’s a tremendous amount of work that happens in that span of that process. But I think what really is challenging is when these strategies come up and they’re very ambitious and they have great intention but what happens is that strategy gets also connected to the solution. Let me unpack that a little bit because I think this is really important is that strategy is meant to make sure there is a clear understanding of where you’re going and the problem space that you are effectively focused on, whether it’s internal or external. The goal is then to prioritize those problems and what oftentimes happen is assumption around solutions is created and coupled with strategy. And that strategy then is in a very difficult position because you’ve set expectations of what those solutions are and you actually haven’t done the work yet to actually define whether or not those things are feasible or viable for the organization. An effective strategy can only be executed on if it matches the resources and the constraints of the organization doing it. And I think that’s one of the beautiful things about the competitive landscape is that intel’s resourcing constraints are very different than the small chip manufacturers coming in looking to take a bite out of the market and so they’re going to approach innovation in a very different way they’re going to look at why they would innovate or invest in certain areas or maybe even transition on how they even position the product altogether to maximize the value that they can create. What’s that unique IP that they bring to that conversation.

Yeah, if I could just interject real quick, please. When you’re talking about intel, one of the things I was going to say was that, okay, but even with Intel’s vast amounts of overall resources, I still distinctly recall that we would have they called them corporate strategic discussions where there’d be something that there were some trend, technology, whatever, that they were looking to try and drive an investment in. And essentially what would happen is you have an internal team that would essentially put together some kind of pitch deck. They bring it to the senior executive management, usually to the CEO, one of the people on the staff, and they’d have a discussion about it. And at the end they’d be like, all right, great. And so then people are like, okay, let’s go do it. And then you get to find people like, whoa, whoa, whoa, whoa, whoa, whoa. This hasn’t actually been funded yet. We have to go through our plan process and then if it survives plan of record process, then it might get funded. Well wait, but this is a strategic imperative. Hey, it has to get funded in the plan process. And so I think with large companies, even though you have more aggregate resources, you always have more projects lined up than you have resources to do. So there’s that internal. There’s that internal, I guess you’d say, resource prioritization that you have to do in order to get something to where it’s executable. So I think that’s actually a way that it’s kind of funny that in some ways that having a lot of resources can actually well, not can does slow you down because if you have the small entrant and they’ve identified a hot segment of the market that they think they can generate an outsized benefit from, it’s usually just going to be a small handful of people. They’re just going to go and do it. They don’t have to ask anyone’s permission. Now on the other hand, they’re going to have to bootstrap it. But still I think that’s the push and pull of the larger versus smaller players. 

Yeah. And that brings up a whole nother, I think, significant challenge that large organizations especially deal with, which is the larger the organization, the more layers in the organization you traditionally have and the more functions in the business that exist. And so keeping those in alignment with the strategic objectives and moving the driving, the primary purpose of the organization can get really muddy and you see that happen time and time again. Apple is a really good example of this where all of a sudden you have this thriving company. Steve Jobs is ousted and moves on to building next. And here all of a sudden the product catalog gets very, very broad, very distributed, starts to move into categories that aren’t really aligned with the core values of the company. And when he comes back in, they’re almost in bankruptcy, right? And he just wipes out the product catalog. We have to focus on our purpose, what we do best. We understand how people want to use these devices and we have insights that can drive real impact and value. And now Apple is what it is today. But there’s one of the key things that you can take away from that is something that I think Steve Jobs knew from the onset and you find needs to be broken out and really understood, which is every single person has a responsibility and role to creating shared value. And that value can be sometimes pushed to a single team or function. And that’s not what happens. And so all of a sudden you have different areas of the company. And this goes back to the culture comment, is that they have different incentives, they’re not aligned on their goals and their targets. So you say, I’ve got the strategic priority. Well, that strategic priority as an organization that needs to be in alignment with the incentives and functions of the business. And so there’s a challenge there. And so we have in many cases still a lot of organizations are trying to innovate their culture because they’re still dealing with the command and control model of the organization that was from the industrial era and not dealing with the current information age and how organizations have reinvented themselves to drive that innovation and change the relationship. Where we’re not asking people just to make things. We’re asking people to solve problems and we’re asking everybody to be part of that because everybody has an invaluable perspective when empowered to contribute to that. And I don’t care if you sit in HR or you’re in finance and you’re on the planning team, but you’re all intricate to that strategy. And so there needs to be a level of inclusion there that’s really important. And when we all understand how we contribute individually, why that contribution matters, we can then build alignment at the individual level. We can really focus on the alignment necessary at the team level and then we can start to align those with the resources of the organization. So planning is more effective. And things tend to happen, though in the reverse in large organizations. Not to throw intel under the bus, so to speak, but just as an intel

Intel’s done okay. 

Yeah, they’ve done an amazing I know some wonderful people there, but there’s any large organization deals with this challenge. The larger you get, you need more checks and balances in place and it just inevitably and when you do that, it takes so much more work for strategy to be effectively communicated through the organization. And one of the biggest efforts that is really difficult for any organization is making sure there’s a shared language and understanding of things in the organization. So an example if I say customer experience, well, that might mean one thing to me and it might mean something different to you. So when we’re talking about it, are we actually talking about the same thing if we went to go work on it? And these types of things are while they don’t seem maybe as high impact, they’re dramatic in how they actually impact this ability to quickly iterate understand, plan effectively and assign resources to the areas that matter because we need that shared understanding in order to collaborate. And so that’s a great indicator. I mean, alignment is one of the biggest indicators of team performance and lack thereof of the ability time to deliver value is driven by alignment. So organizations that understand that tend to simplify their.org structures and empower that culture as much as possible to promote that. 

Well, and actually because I think there’s a part of me that’s like, well, we need to worry about time but this is just such a good pivot that I can’t let it go when we’re talking about change in order because I think you are 100% correct because what I just heard you talk about is what I call the general electoral religion of organization design. And it’s got kind of started to fall out of vogue now but in the 1990s and 2000 the GE model, which is where you had layers and layers and layers and layers and layers of hierarchical middle management who were all doing rating and ranking of each other to be able to try to structure a hierarchical bench for eventual ascension to DP, CXO. Whatever roles that was a big thing about 10 20 years ago. But I think it’s day has passed. I think there’s just some relics who are holding on to it for precisely the reason that you’re talking about. Which is that the hierarchical management method was based out of the Industrial Revolution for a command and control. Which is where. Say. You had a person who was in charge of ten people and for every ten of them you had one person who was in charge of them. For every ten of them you had one of them or whatever your ratios were. So then you ended up having this rather elaborate management leadership chain. You have to figure out, okay, well, how do you spot the next leaders? How do you figure out who you’re going to promote or you’re not going to? And so then you almost create this internal culture where you know, where at a certain point your career becomes more about how well you manage within the company than how well you produce results for the shareholders. And once that happens, I think that the only thing that can protect a company from destroying itself is if you have monopolistic pricing power. At least that’s my observation. And so when you’re talking about the importance of changing your.org structure around these results, I think that that is something that everyone should stop the recording, go back and listen to again because that is something that I think is just critically important that it’s really easy to miss. 

Doug, I think you said that perfectly. And I think it couples to this other thing that we have started a lot in the last 20 years to really unpack more a deeper understanding of what value is and how value generates. If we want to create, as you said, shareholder value, well, what generates shareholder value? What’s the driver of that value creation? Money as an example of revenue is just a lagging indicator of performance. So what is that value point? And now there are so many new business models around. Well, it’s about attention, it’s about time. It’s accessibility to services or information or all these other ways that we’ve started to frame value. And what the beautiful thing is that understanding is now working its way into the internal operations of companies. It’s like, how do we understand the value of how our teams contribute? Or how do we look at two points of value? What’s the functional value that our business creates? What’s the psychological value? I think about that. You think about a company like Volvo, right? So they’re a car company, that there’s a lot of car companies out there. Well, where’s the psychological value? Well, Volvo is known for safety. So what are they selling? Well, they’re selling to the consumer who cares about safety. And all of their products have to meet that psychological value point. Otherwise their business is off track, it’s off strategy. The functional value of all the different vehicles they provided, modes of transportation is those are table stakes. Where you have Toyota, they’re selling reliability. At the end of the day, that’s the value that they’re focused on. Safety is table stakes for them. It’s a given. You have to have a safe vehicle for your family. So really understanding to your point where creation and this evolution is taking place of value is just absolutely, I think, the cornerstone of the most successful companies you see today and where small to medium sized businesses can have the most impact on the market right now, if they can define that effectively with their strategies. 

Outstanding. Well, hey, Jonathan, I think we’re getting close to time, but give us your last one to two thoughts and then make sure to let us know. Let us know where we can learn a little more. Of course, we all know. Well, your website will be in the show, in the show notes at emergenteractive.com, so I won’t spell it out again. It will be right there in the notes. But let us know your last couple of thoughts.

Well, I think that one of the key things from what we’ve been talking about that really stands out to me is that in the absence of strategy, in the absence of this direction, is that a lot of times we look at the lack of sales or the lack of engagement with customers. And I think that one thing that’s really important to highlight is that it’s very possible without clear strategy, and I mean really vividly clear that brings focus for everybody, that the root causes of our failure, or another way to think of failure is missed expectations is this idea of that it’s actually internally driven, not externally driven by the market. Our inability to make or maintain market fit the challenges are usually the root causes of those challenges can usually be found inside the organization. And I think for anybody listening, that is not a criticism, it’s an opportunity. It’s something you control. And I think that’s the most powerful thing about understanding root causes of some of these issues is that they are absolutely things that you can take control of and they are not something that you have to react and respond to purely. That you’re in the way of a marketplace that’s moving at lightning speeds. You have the ability to really dictate these things based on the rules of the games you’ve established with the focus of your business and your products. So I think that’s just one thing. I just would really love people to take away from this and understand that they have an incredible opportunity from that if they can embrace that. 

Outstanding. Well, Jonathan, I really, really appreciate your time today. 

It’s been my pleasure. Thank you so much for having me on the show. Doug. 

Alright. Awesome.

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